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Mortgage

A Guide to Mortgage Fees

If you’re wondering how much your mortgage will cost you, you’re in the right place. Learn all about mortgage fees in our post.

Your mortgage is probably going to be one of the most expensive things in your life. The actual loan to buy your home, plus the interest, isn’t everything you’re going to pay. Yes, there’s a lot of additional fees and charges that come with a mortgage, which means that you’re not just repaying what you borrowed along with the interest – you’re essentially paying to set up and maintain your mortgage too. Through using online mortgage brokers, you can avoid some of these charges, which we’ll explain more further down.

In this post, we’re going to be looking at mortgage fees. Specifically, what type of fees you’ll pay and roughly how much it will cost you. So, if you’re looking to find out more about mortgage fees, you’re in the right place. Learn about all the fees, below.

Transparency

Luckily, since 2016, it’s now required that mortgage lenders include what you’re going to be paying, regarding mortgage fees, in the calculation of your annual interest. This is referred to by lenders as an Annual Percentage Rate of Charge (APRC). All of the fees and charges for your mortgage will be outlined in your enhanced keyfacts illustration or a mortgage illustration document (sometimes called a European Standard Information Sheet [ESIS]). Now, on to the fees and what you’re likely to pay.

Mortgage Fees

In this section, we detail what the mortgage fees are called, what they’re for and how much you are likely to pay.

  • Arrangement Fee

The first fee you’ll encounter is an arrangement fee – this is charge by your lender for setting up and arranging your mortgage. This fee can be added onto what you already owe but obviously it may increase what you’re paying back in total. This fee can range anywhere from £0-£2000.

  • Booking Fee

This cost is charged when you apply for a mortgage deal. It’s not usually refundable (even if your mortgage falls through). However, you may find that some mortgage lenders will attach the booking fee to the arrangement fee and include it in the price. The cost of this fee is largely dependent on the size of the mortgage. It can range anywhere from £99-£250.

  • Valuation Fee

In order to make sure the property you’re buying is worth the amount you want to borrow from the lender, mortgage providers will value the property – for which they charge a fee. Whilst some lenders may offer a free valuation as part of their service, it’s something that you’ll need to pay for in order to secure your mortgage. Your lender wants to know that their investment is sound and there are no problems with the property and that the property is worth the cost of the mortgage. This fee can be anything from £150-£1500 and is dependent on the value of the property.

  • Telegraphic Transfer Fee

This fee is a charge of sending the money for your mortgage to your solicitor. This fee can be known as a Clearing House Automated Payment System or CHAPS, it’s usually a non-refundable fee which means that if the deal falls through, you’re unlikely to get it back. This can cost anywhere between £25-£50.

  • Mortgage Account Fee

The actual ‘set-up’ of your mortgage has some costs attached to it. This fee pays for the setting up, maintenance and closing of your mortgage. It’s important to note that if you’ve paid this fee, your lender will not charge you for a mortgage exit fee, but if you repay early you may still be charged for an early repayment fee.

  • Missed Repayment Charges

If you miss any repayments on your mortgage some most lenders will charge you a fee. The costs are largely dependent on the lender, and if you’re consistently making or missing repayments your home could be repossessed.

  • Mortgage Broker Fee

Using a mortgage broker to find your mortgage may mean you have to pay a fee. The costs are dependent on how your broker is going to charge you. Some charge hourly or for a percentage of your mortgage. However, online mortgage brokers are sometimes free.

  • Higher Lending Charge

If you have a smaller deposit, your lender may charge you a higher lending charge. It’s usually around 1.5% of your mortgage costs, and it’s thought of as an insurance for borrowers with smaller deposits.

  • Early Repayment Charge

Some lenders will charge an early repayment fee or charge if you choose to pay off your mortgage early. Early repayment charges are outlined in your mortgage’s keyfacts illustration and can tell you the costs of repaying early. However, it’s known to be around 1-5% of the early repayment’s value.

  • Exit and Closure Fees

All lenders will charge this, if they haven’t charged you a mortgage account fee that includes closure fees. This fee is for the closing of your mortgage ‘account’ and clearing your mortgage, even if you’re clearing it early. This is usually around £75-£300.

These are all the fee attached with your mortgage. However, please bear in mind that buying a property means you’ll need to also pay for moving costs, legal services, survey fees and stamp duty (where applicable).

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